Irrational exuberance again?

John Hussman's Hussman Strategic Growth Fund (HSGFX, a mutual fund that uses options to hedge
long positons) has the best Sharpe ratio of any mutual fund.  That's why his weekly letter is worth reading.   Here's what he has to say about current market valuations:

As of last week, the Market Climate for stocks was characterized by dangerously high valuations and moderately favorable market action. The price/peak earnings multiple on the S&P 500 is now 21.08, exceeding the peaks of 1929, 1972 and 1987, and revisiting the condition best known as irrational exuberance. The historical norm on prior  peak earnings (whether or not earnings were actually at a current  peak) is 14. The historical norm on actual record earnings (as is the case today) is 12. The current dividend yield on the S&P 500, despite substantially higher dividends, is just 1.71% (the historical norm is about 4%).

Look. Earnings remain well contained in the same 6% peak-to-peak growth channel that has contained them for the past century, including the roaring 90's. Even if we assume further growth to fresh peak earnings 5 years from today and a terminal P/E of 18 (which is still so far above the historical norm of 12 on actual record earnings as to make the assumption foolishly optimistic), the total return on the S&P 500 over the coming 5 years would be [(1.06)(18/21.08)^(1/5)+0.0171(1+21.08/18)/2 - 1] = 4.56% annually. When foolishly optimistic assumptions still produce disappointing conclusions, investors should be prepared for bad things to happen.

That's not to say that stocks cannot move higher, but we continue to observe speculative merit without investment merit. Indeed, investment merit is so lacking, and speculative conditions so extremely overbought (the recent, uncorrected spike is beyond belief on a P&F chart), that a vertical decline off of this “high pole